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APAC fintech market set to bloom

Government support, the rise of digital payments and a new breed of financial services will put the region’s financial technology market in overdrive over the next few years

The Asia-Pacific (APAC) financial technology (fintech) market is set to grow this year, led by growing adoption of digital payments and the emergence of a new breed of financial services across the region.

According to Frost & Sullivan, the fintech industry in APAC is expected to grow at a compound annual growth rate of 72.5% between 2015 and 2020, reaching $72bn over the next two years.

Widespread awareness of peer-to-peer financing, as well as new crowdfunding mechanisms using blockchain, will also spur growth in the personal and business financing segment.

The upside follows significant growth in the region’s fintech industry in 2017, which the market research firm attributed to active support and initiatives by the region’s central banks, including the Monetary Authority of Singapore (MAS), Bank Negara Malaysia and Bank Indonesia.

In 2016, the MAS published “regulatory sandbox” guidelines to encourage and enable experimentation of fintech to deliver financial products and services. Such sandboxes also include safeguards to contain the consequences of failure and maintain the overall safety and soundness of Singapore’s financial system.

Malaysia’s Bank Negara has a similar sandbox initiative, with participants such as GetCover, an insurance aggregator platform; MoneyMatch, a remittance and money-changing service provider; and the country’s major lender, CIMB Bank, which is experimenting with electronic know-your-customer processes to identify and verify the identity of clients.

Emerging trends in fintech

Speaking at Frost & Sullivan’s annual fintech outlook event in Singapore last week, Spike Choo, consulting director at the research firm’s ICT APAC practice, noted that more fintech initiatives will be launched this year to encourage consumers and enterprises to adopt digital payments.

That is in line with Singapore’s push to drive mobile payments, a market estimated to be worth $1.4bn in 2017. But for the market to reach its full potential, mobile payment systems need to be global-first, interoperable and secure, rather than “me-too” offerings built with a local-first mentality, according Quah Mei Lee, industry principal at Frost & Sullivan APAC.

Choo also expects to see more innovative fintech services being launched in the areas of financial investments, insurance and advisory services, due to advances in big data analytics, artificial intelligence and blockchain. However, he warned that for these new fintech services to be sustained, service providers would have to address wide-ranging investment and insurance needs without compromising customer experience.

Read more about fintech in APAC

  • DBS Bank has claimed the honour of having the world’s biggest banking application programming interface platform, with more than 155 APIs that developers can plug into to create a variety of services.
  • Singapore’s central bank is overseeing a project that could lead to a single blockchain system being used for banks to transact with each other.
  • Although blockchain is no silver bullet, experts say Australian organisations should embrace and invest in the technology.
  • Australia’s federal budget has a surprisingly low financial commitment to fintech, despite the country’s clear appetite for developing the sector.

Retail investors and consumers are not the only beneficiaries of the global fintech boom. More small and medium-sized enterprises (SMEs), which have traditionally been neglected by existing banks, now have access to peer-to-peer lending services from alternative financing providers.

Shuvro Mainuddin, Frost & Sullivan APAC’s consultant for banking and financial services, said: “No longer just a channel, ‘digitisation’ is the new paradigm for leading banks and financial institutions in Southeast Asia to cater to the increasingly important SME client base. Such widespread adoption of fintech will continue to reshape the financial services industry, making it more customer-focused than ever.”

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